The European Timber Regulation (EUTR) has been in force for nearly ten years. Now, the EU is replacing it with a new regulation that covers timber as well as other commodities. On 6 December 2022, the EU reached an agreement on new legislation – the European Union Deforestation Regulation (EUDR) – to prevent companies from placing on the EU market or exporting from the EU goods associated with deforestation and forest degradation.

Goods and products covered

The new regulation sets out mandatory due diligence rules for operators – organisations that place on the EU market or export from the EU specific goods or products associated with deforestation and forest degradation. Initially, 7 commodities were included within the scope of the EU regulation: timber, soya, beef, palm oil, cocoa, coffee and rubber.

For each commodity, the regulation specifies which products are included within the scope of the law according to the EU customs tariff list. The list also includes some derived products, such as leather, chocolate and furniture.

In essence, this means that any product or commodity imported or exported under a different customs code will be considered outside the scope of the regulation.

Prohibitions

Products of the goods included in the regulation may only be placed on the EU market or exported from the EU market if:

they are not associated with deforestation,

they have been produced in accordance with the relevant legislation of the country of production,

they are covered by a due diligence statement.

The regulation stipulates that the cut-off date for deforestation (and forest degradation) is 31 December 2020. In other words, after 31 December 2020, goods must not have been produced on land where deforestation (or forest degradation) has occurred.

Due diligence requirements

The main requirement is the obligation for operators to implement a due diligence system to avoid sourcing goods or products that are not deforestation-free or not produced in accordance with the relevant legislation of the country of production.

Companies that offer relevant goods on the EU market or export them from the EU market (“operators” under the regulation) are obliged to implement this due diligence system by carrying out a risk assessment and mitigating any non-negligible risks before placing the goods on the EU market or exporting them.

Operators are obliged to report publicly on an annual basis, as widely as possible, including online, on their due diligence systems and the measures they have taken to ensure the fulfilment of their obligations.

Companies described in the regulation as “traders” (those who trade goods that have already been placed on the EU market) are responsible for keeping and exchanging information about their supply chains (upon request with national competent authorities). However, large traders that are not small and medium-sized enterprises (SMEs) will also have to conduct due diligence. This is due to the scale of their influence in supply chains.

Strict traceability and transparency obligations

The regulation sets an obligation for Operators to obtain the geographical coordinates (latitude and longitude of all plots of land) from where the goods or products were produced or harvested in the case of timber products, as well as the date or time range of production.

Coordinating enforcement measures

A new feature of the regulation is that the European Commission will establish a central risk assessment database or “country benchmarking”. This system will classify countries into low, standard or high-risk categories to help conduct due diligence and checks on goods or products associated with deforestation.

Operators sourcing raw materials from countries that the Commission has designated as “low risk” will be allowed to carry out a “simplified due diligence”, meaning they will not have to carry out the second and third stages of the due diligence process, i.e., risk assessment and risk mitigation. However, operators will still have to carry out the first stage of due diligence, namely collecting information about their supply chains. This includes obtaining information about the geolocation of the forest/farm production plot.

The responsibilities of national authorities to implement the regulation and carry out checks will also differ depending on the risk level assigned to the countries of production. This means increased surveillance in high-risk countries and reduced surveillance in low-risk countries.

Furthermore, a centralised information system will be established to receive and register the due diligence statements of operators, which will be attached to applications for customs formalities. This system will be accessible to national and customs authorities regarding operators and traders operating in the EU and will potentially include several features, such as the ability to register operators, upload and link due diligence statements with customs declarations, and allow for the creation of risk profiles of operators and relevant goods/products to identify high-risk shipments.